Kenya Power loses Sh3.7 billion in unrecovered fuel costs
Wednesday 25 January 2023
Utility Kenya Power lost Sh3.7 billion on a surcharge freeze, including the fuel cost fee and adjusting for exchange rate fluctuations in the six months to last June.
The additional losses for the utility show the financial strain the company faces in supporting the government’s 15 percent cut in electricity costs last year.
According to the audit of the utility company’s accounts in June 2022, Kenya Power had revenues of Sh7.3 billion and Sh24.4 billion in respect of foreign cost adjustments and fuel costs respectively.
However, the income was offset by corresponding foreign exchange costs and fuel costs amounting to Sh9.1 billion and Sh26.4 billion, respectively.
Read: Kenya Power loses 2 billion shillings in tariff rebates
“Forex and fuel costs are passed on to customers so are expected to match. Management has indicated that the discrepancy is due to the actual recovery rates approved by the Energy and Petroleum Regulatory Agency for billing to customers being lower than the actual rates applied by producers at the time electricity is purchased ‘ remarked the Auditor-General.
Surcharges on customer bills remained unchanged at Shsh4.63 per unit or 73 cents between December 2021 and last August, anchoring the government-backed utility bill subsidy.
The surcharges reflect the cost of generating electricity from thermal sources and foreign exchange costs incurred by Kenya Power in purchasing electricity.
Both levies were flat over the nine months, despite notable changes in fuel costs and a weaker Kenyan shilling against major currencies over the period, including the US dollar.
The pause in rate adjustments served to keep electricity costs unchanged at Sh21.87 per unit for the average household consumer.
However, the gains for consumers were losses for Kenya Power, which lost a further Sh2.2 billion as related agencies including KenGen, Kenya Electricity Transmission Company Limited and Geothermal Development Company Limited did not play their share of the cost cutting .
KenGen, for example, refused Kenya Power a Sh1.75 billion rebate on its bill, leaving the utility to shoulder the burden of introducing the tariff cut alone.
However, adjustments to FCC and FERFA fees have been reinstated since September last year before subsidies on electricity prices expire.
The government announced it would end electricity subsidies late last year as it seeks to ease the burden on Kenya Power, which has borne the full weight of electricity bill rebates over the past year.
Read: Kenya Power headcount down by 1,400
However, EPRA has yet to publish new electricity tariffs for household and industrial customers, which would mean the end of the subsidy program.
The regulator of the energy sector published new tariffs in January last year, thereby implementing the government’s initiative for low electricity costs.
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